Question 1

Annual growth in industrialized countries is usually measured in terms of&#10;A) consumer spending.&#10;B) new net investment.&#10;C) income distribution.&#10;D) real GDP.

Accepted Answer

Annual growth in industrialized countries is usually measured in terms of real GDP because it is an indicator of the total value of goods and services produced in a country during a specific period, adjusted for inflation. Other options such as consumer spending, new net investment, and income distribution may also be considered as factors that contribute to economic growth, but they are not the primary measures of growth in industrialized countries.

Question 2

The money used to buy equipment and buildings is called&#10;A) physical capital.&#10;B) human capital.&#10;C) financial capital.&#10;D) depreciation.

Accepted Answer

Financial capital refers to the funds that are used to purchase physical assets like equipment and buildings.

Question 3

The percentage of national income that flows into savings each year is&#10;A) the average propensity to save.&#10;B) the rate of growth.&#10;C) the accumulated profits of businesses.&#10;D) the government budget deficit.

Accepted Answer

The percentage of national income that flows into savings each year is known as the average propensity to save.

Question 4

What two things do the rate of growth of the economy depend on?&#10;A) The amount saved out of national income and the amount invested.&#10;B) The amount of GDP produced per dollar of investment and the rate of depreciation.&#10;C) The amount saved out of national income and the amount of GDP produced per investment dollar.&#10;D) The amount saved out of national income and the rate of interest.

Accepted Answer

The rate of growth of the economy depends on the amount saved out of national income, which increases the pool of funds available for investment, and the amount of GDP produced per investment dollar, which indicates the efficiency and productivity of investment. Therefore, choice C is the correct answer as it combines the two factors.

Question 5

According to conservatives, what are the two ways to increase the rate of economic growth?&#10;A) Increase savings and increase consumption.&#10;B) Increase savings and increase gross investment.&#10;C) Increase savings and increase the productivity of capital.&#10;D) Increase savings and reduce taxes on wealthy investors.

Accepted Answer

Conservatives believe that increasing savings and increasing the productivity of capital are the two ways to increase the rate of economic growth. By increasing savings, there will be more funds available for investment, which will lead to an increase in gross investment. At the same time, if the productivity of capital increases, there will be a higher output for the same amount of capital input. This will result in higher profits and hence, more savings that can be reinvested in the economy.

Question 6

According to conservatives, which policy should government implement to encourage economic growth?&#10;A) Cut taxes on low income individuals to increase consumer spending.&#10;B) Cut taxes on the middle class to encourage consumer spending and saving.&#10;C) Cut taxes on the wealthy who are more likely to save.&#10;D) Increase taxes on the middle class to discourage excess consumer spending.

Accepted Answer

Conservatives often argue that cutting taxes on the wealthy encourages investment and savings, which in turn fuels economic growth by providing more capital for businesses to expand and create jobs. This approach is sometimes referred to as "supply-side economics" or the "trickle-down" theory.

Question 7

According to conservatives, which of the following will be most likely to increase the productivity of capital?&#10;A) More research and development of new technology by government.&#10;B) More research and development of new technology by business.&#10;C) Increasing the level of gross investment.&#10;D) Increasing the rate of depreciation.

Accepted Answer

Conservatives generally believe in limited government intervention and promote free market principles. Therefore, they are more likely to believe that businesses should be responsible for research and development of new technology as opposed to government. This would increase the productivity of capital by improving the efficiency of production processes and providing businesses with a competitive edge. Options A, C, and D may also have some impact on increasing productivity of capital, but they may not align with conservative ideology as they involve government intervention or policies that may increase business costs.

Question 8

The possibility that there would be sufficient money for investment from savings and a very low rate of investment&#10;A) is predicted by Say's Law.&#10;B) will not occur according to Say's Law.&#10;C) has never occurred.&#10;D) will occur if profit rates are too high.

Accepted Answer

Say's Law states that supply creates its own demand, meaning that if goods and services are produced, they will be consumed and therefore generate income for producers, which can then be used for investment. According to Say's Law, there can never be a situation where there is excess savings and insufficient investment, as saving will always lead to investment. Therefore, the possibility described in the question contradicts Say's Law and will not occur according to it.

Question 9

A higher rate of national saving&#10;A) is always a good thing.&#10;B) is beneficial during an expansion at full employment.&#10;C) is not helpful during a recession.&#10;D) is beneficial as long as it is accompanied by increased consumer spending.

Accepted Answer

The answer of A higher rate of national saving&#10;A) is...

Question 10

A high level of consumer spending&#10;A) is always a good thing.&#10;B) is especially beneficial during a recession.&#10;C) is not helpful during an expansion at full employment.&#10;D) is beneficial as long as it is accompanied by increased consumer saving.

Accepted Answer

High consumer spending can stimulate economic activity and help pull an economy out of a recession by increasing demand for goods and services, which can lead to job creation and more investment in businesses.

Question 11

A high rate of military spending by the government&#10;A) is beneficial to the economy during a period of full employment.&#10;B) tends to increase investment and consumer goods during a period of full employment.&#10;C) will tend to put the economy into a recession.&#10;D) will tend to reduce the rate of capital investment over a long period of time.

Accepted Answer

The answer of A high rate of military spending by...

Question 12

Between 1950 and 1999 the annual rate of GDP growth in the US&#10;A) has been between 1 and 3%&#10;B) has been at least 5%&#10;C) has been between 3% and 5%&#10;D) has been around 10% per year.

Accepted Answer

The answer of Between 1950 and 1999 the annual rate...

Question 13

During the 1970s and 1980s&#10;A) the U.S. economy experienced a &#34;golden age&#34; of economic prosperity.&#10;B) the United States began to compete effectively with, and in some cases outcompeted, European and Japanese corporations.&#10;C) the United States produced over 80% of the world's manufactured goods.&#10;D) the United States went through a long period of relative stagnation.

Accepted Answer

The answer of During the 1970s and 1980s&#10;A) the U.S....

Deck 6: Introduction to Economic Growth